How the new US crypto bill could finally define commodities and securities

Senate bill targets crypto’s regulatory paradox: Security vs. commodity

Since its inception, the US cryptocurrency industry has faced a regulatory challenge: determining when a digital asset qualifies as a security and when it qualifies as a commodity.

This uncertainty has hindered institutional adoption, fueled legal disputes and made it difficult for crypto companies to interpret complex rules. But a draft bill from the Senate Agriculture Committee, led by Chair John Boozman and Senator Cory Booker, proposes changes that may address this.

The bill is part of a broader effort to establish a unified framework for digital asset markets. The bipartisan discussion draft outlines how the US could classify crypto assets and assign oversight responsibilities. It marks a significant step toward settling the long-running debate over whether crypto assets are commodities or securities.

Crypto projects in the US have long been unsure whether they need to register with the Securities and Exchange Commission. Trading platforms have struggled to determine what tokens require securities licenses. Institutional investors have held back because compliance expectations are unclear. And regular crypto traders have faced a fragmented market with inconsistent protections.

The proposal aims to establish a clear federal distinction between digital commodities and digital securities.

Did you know? In 2019, when Facebook announced its Libra project (later renamed Diem), global regulators reacted quickly. G7 ministers, central banks and the US Congress raised concerns that a private company could create a global currency. The backlash became a turning point for stablecoin regulation worldwide. The project was eventually shut down in January 2022.

What is a digital commodity?

The draft bill introduces a major new concept: the digital commodity. Under this plan, coins such as Bitcoin (BTC) and Ether (ETH) would be classified as digital commodities.

A digital commodity is essentially an interchangeable token. You can fully own it and transfer it directly to someone else without an intermediary. It is recorded on a public, cryptographically secured blockchain. Under the bill, these digital commodities would fall under the Commodity Futures Trading Commission (CFTC) rather than the SEC.

Here’s how the concept of a digital commodity could change the scenario:

• Clear rules for big investors: If certain coins are officially labeled digital commodities, banks, funds and trustees could hold them without risking federal violations.

• Less uncertainty: Companies would no longer have to worry about the SEC unexpectedly declaring their token a security.

• Two different markets: Digital commodities deemed “safe” would likely see higher trading volume, more derivatives activity and increased institutional participation. Tokens that do not qualify would remain under SEC oversight.

Did you know? Long before crypto went mainstream, the US classified Bitcoin as “property” for tax purposes in 2014. This means every crypto trade could trigger a capital gains event. Ironically, it became one of the earliest forms of crypto regulation worldwide, predating major adoption.

Categorization of coins and a shift in regulatory power

The bill clarifies what qualifies as a commodity, but it does not fully define what qualifies as a security. The classification of decentralized finance (DeFi) projects, governance tokens and hybrid tokens would be determined later.

If a token does not fit the “digital commodity” category, exchanges, issuers and wallet providers can expect it to fall under SEC review.

Broadly, the bill outlines three regulatory lanes:

• Clear rules for commodities, including major assets such as Bitcoin and Ether

• Stricter, security-style oversight for many utility tokens, governance tokens and tokenized assets

• Tough requirements for new token issuances, including disclosures and compliance checks.

A token’s design determines how it will be regulated. Three key factors matter: how decentralized it is, what purpose it serves and how it is sold. These elements decide whether it falls under the more flexible CFTC or the stricter SEC.

A key change in the draft bill is the proposed shift in regulatory power. Historically, the SEC has held primary authority over crypto. But the new proposal significantly expands the CFTC’s role, giving it oversight of:

• The direct trading market for digital commodities

• Registration and supervision of exchanges, brokers and custodians that handle these assets

• New rulemaking authority — in some cases shared with the SEC

• The ability to collect fees to fund its expanded digital asset oversight duties.

This marks a major shift away from the SEC’s reliance on enforcement actions. The new framework favors a structured, predictable regulatory system, meaning the crypto industry could face fewer surprise legal actions and benefit from clearer, more consistent rules.

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